Global and regional trade integration offers Pakistan tremendous potential in driving and sustaining growth and poverty reduction. Despite this potential, trade has not been effectively leveraged to catalyse growth in Pakistan in recent years. Trends in relative trade and competitiveness have been worrying, with export earnings declining 20 percent over the period FY2011-2017 and market share contracting by 1.45 percent annually. Understanding the constraints on trade and competitiveness from the perspective of the private sector engaged in export activities is critical to developing and implementing effective trade policy.

 

To support the Government of Pakistan in the preparation of its new Strategic Trade Policy Framework (2018- 23), the World Bank Group conducted a series of private sector stakeholder consultations with current, past and potential Pakistani exporters in the manufacturing, agro processing, and services sectors. A total of 254 private sector representatives participated in four separate events organized in different provinces between September and November 2017.

 

This note summarizes the main concerns expressed by the private sector during these consultations. The note’s main objective is to contribute to a fruitful private-public dialogue which can ultimately lend inputs for trade policy. The role of the World Bank Group in this respect is to bring together the private sector and the public sector, so that the constraints that the former face are presented to the latter. As such, the challenges to be summarized here are those identified by the key firms present during the private sector engagement meetings, during the fourth quarter of 2017, and not by the World Bank Group.

 

Key challenges to export competitiveness identified by the private sector via these consultations include: a) regulatory constraints at federal and provincial government levels, b) high cost of doing business, including energy costs and import tariffs, c) inadequate trade facilitation and supporting instruments, d) lack of coordinated support from institutions responsible for export promotion and help towards market and product diversification, e) weak availability of credit for exports, particularly for potential and new exporters, and f) an exchange rate regime that is perceived to reinforce the anti-export bias of the de facto trade policy. Participating business associations also called for a detailed evaluation of reasons due to which intended benefits from Pakistan’s free trade agreements (FTAs) and European Union’s Generalised Scheme of Preferences (GSP+) could not be achieved.